Title: A Grand Strategy Look at the Greek and German Economies.
Author: Andrew M Molchan
Date: Wed June 27th, 2012
6/27/2012 ANDY'S UNPOPULAR INSIGHTS. A Grand Strategy Look at the Greek and German Economies.
The delusional "Gold Bugs" keep talking about how the world has to go back to the Gold Standard. The "Problem" is that the Euro part of Europe is ALREADY on a de facto Gold Standard.
Greece, Spain, Italy, etc., being on a de facto Gold Standard CANNOT fabricate unlimited amounts of their own Queer Money like America is doing.
As a side-note, a year ago when Gold was pushing $2,000 an ounce, and the Gold Bugs were all saying it was going to $5,000. I said that Gold was in non-inflated dollars back up to its 1980 high, and would NOT go higher.
What's keeping the price of Gold up is that EVERYTHING else is paying (with inflation and taxes) LESS than zero interest. When "real" interest on Bonds and Bank Accounts return then Gold WILL crash.
What happened with Greece is that Germany has factories that produce many products, and Greece has Wine Bars. The "Gold" (i.e. Euros) did what Gold has done for 10,000 years. Wealth always FLOWS TO those who produce more, and/or had the biggest armies to take Gold. For 10,000 years Gold has FLOWED FROM those who produced LESS, and/or were too weak or lazy to defend their Gold.
The "Cure" (Germany is now being conned into) is for Germany to give its Gold (the Gold it earned with its hard work), BACK to Greece, Italy, Spain, Portugal, and so forth in the form of "loans." Then, Greece, etc., can use Germany's money keep buying products from Germany.
The so-called "Cure" is for German to sell products to people who are using German's loaned money to them so they can pay for the German products. With ZERO Probability of the money ever being paid back to Germany.
This is like depositing your paycheck BACK into your own company as "income" so you can pay tax on it a second time, third time, forth time... (Heavens! Look how Rich we are!)
What's in it for the Germans? The answer is LESS than NOTHING. Giving Germany's earned Gold BACK to the Greeks etc is the DELUSION that the Greek etc money is NOT Germany's Money. The "Cure" is the DELUSION that the "loans" will be repaid when the Greeks etc have NO WAY (and No Intention) of ever Repaying the loans.
If I were the Germans I'd say to the Greeks etc, "Work harder and smarter, and learn to live within your means. Work harder and smarter and learn to consume ONLY the value that you produce. If you want MORE, then Work More. ONLY THEN will the 'Loans' follow. So the SOONER YOU start WORKING harder and smarter, the sooner you'll get your loans, and the sooner you'll have a REAL Recovery."
Right now Greece is saying, "Give us another 500,000 pounds of cocaine so we can feel better today. Give us the cocaine NOW, and we really, REALLY, absolutely promise to Change our ways and Get Straight next year. Sure!
Santa Claus is nice, but there comes a time in life when you have to grow up and stop believing in Santa Claus.
For the last four years Bernanke and Geithner have been going to Germany, and telling the Germans that they need to turn Queer like America. Now, all of the Over-Spending, weak, glutton, lazy countries of Europe are telling Germany the same thing.
Hopefully, Germany will NOT listen to the Bernanke welfare-weaklings, and will NOT kick the cans down the road into bigger problems. Hopefully, German will become the adult Europe needs, and Germany will build Europe a new backbone. No pain - no gain.
P.S. I post additional comments on one of my two Facebook pages: Andrew M Molchan. Look for the page with the comments.